Correlation Between Swedbank and Tellusgruppen

Can any of the company-specific risk be diversified away by investing in both Swedbank and Tellusgruppen at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Swedbank and Tellusgruppen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Swedbank AB and Tellusgruppen AB, you can compare the effects of market volatilities on Swedbank and Tellusgruppen and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Swedbank with a short position of Tellusgruppen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swedbank and Tellusgruppen.

Diversification Opportunities for Swedbank and Tellusgruppen

-0.61

Correlation Coefficient

Swedbank  Tellusgruppen

Excellent diversification

The 3 months correlation between Swedbank and Tellusgruppen is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and Tellusgruppen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tellusgruppen AB and Swedbank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Swedbank AB are associated (or correlated) with Tellusgruppen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tellusgruppen AB has no effect on the direction of Swedbank i.e., Swedbank and Tellusgruppen go up and down completely randomly.

Pair Corralation between Swedbank and Tellusgruppen

Assuming the 90 days trading horizon Swedbank AB is expected to generate 0.43 times more return on investment than Tellusgruppen. However, Swedbank AB is 2.32 times less risky than Tellusgruppen. It trades about 0.33 of its potential returns per unit of risk. Tellusgruppen AB is currently generating about -0.1 per unit of risk. If you would invest  21,380  in Swedbank AB on November 29, 2024 and sell it today you would earn a total of  4,730  from holding Swedbank AB or generate 22.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	87.93%
Values	Daily Returns

Swedbank AB  vs.  Tellusgruppen AB

Swedbank AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Swedbank sustained solid returns over the last few months and may actually be approaching a breakup point.

Tellusgruppen AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tellusgruppen AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Swedbank and Tellusgruppen

The main advantage of trading using opposite Swedbank and Tellusgruppen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swedbank position performs unexpectedly, Tellusgruppen can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tellusgruppen will offset losses from the drop in Tellusgruppen's long position.

The idea behind Swedbank AB and Tellusgruppen AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.